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China Vanke 2008 profit drops 17%, cuts housing starts

(Agencies)
Updated: 2009-03-10 11:59

China Vanke Co, the country's biggest listed real estate developer, on Monday reported a 16.7 percent fall in 2008 profit as the global financial crisis dampened demand and it downsized its housing start target by 23 percent this year.

Related readings:  Vanke dangles goodies to lure new home buyers  Vanke sales up 3.4% year-on-year, but down from October  Construction: Property lull drags down Vanke profit  Vanke to issue 5.9b yuan in corporate bonds

But the property firm said it would continue to buy land to meet future development needs and prepare for an upswing in the market.

"We are cautiously optimistic for the market this year," chairman Wang Shi told a news conference. "But we cannot simply conclude, based on recent strong sales figures alone, that an upswing of the property sector is underway."

He would not give a forecast for the property market but pointed to possible growth in sales volumes in major Chinese cities this year following the estimated 20 percent drop seen in 2008.

Shares of the Shenzhen-listed firm have rebounded 22.3 percent this year on improved sales as Beijing's recent supportive measures lifted sentiment and in line with a recovery in the Chinese stock market. But the stock lost 64.2 percent of its value in 2008, compared with 65.4 percent drop in China's benchmark Shanghai Composite Index.

China Vanke's property sales in February rose to 3.9 billion yuan ($570 million) from 2.2 billion yuan in Janaury.

Vanke made a net profit of 4.03 billion yuan in 2008, down from 4.84 billion yuan profit a year ago, partly due to a 1.23 billion yuan provision for the devaluation of inventory.

It sold 5.57 million sq m of space worth 47.87 billion yuan last year, down 9.2 and 8.6 percent, respectively on 2007, the company said.

Taking a cautious approach, China Vanke revised down its target for construction work starts by 23 percent to 4.03 million sq m in 2009, but lifted its projected completions target for this year by 17 percent to 6.19 million sq m.

Property firms in China are expected to continue to face difficulties in financing in 2009. Wang said this would create an opportunity for companies with solid balance sheets, like Vanke, to buy smaller competitors or land at premium locations at low cost.

"We will be very selective in acquisitions," said Shirley Xiao, executive vice president.

China's housing prices declined substantially and sales volumes shrank in 2008 as the growth in the world's third-largest economy slowed amid the global financial crisis.

The Chinese government has issued a number of supportive measures recently to stablise prices and boost sales in the property market.

Guangdong provincial government has allowed real estate developers to defer land premium payments and to pay property gains taxes in instalments in a bid to support companies suffering from tight cash flows.